- How Many US Consumers Will Shop this Weekend?
- Tuesday's Heavy Dose of Data to Dictate 'Risk' Behavior
- World's Largest Share Issue Priced at Deep Discount
- Obama says Boosting US Jobs is Top Priority
- Why the Dollar Will Likely Stay Weak for Some Time
- Playboy to Outsource Most Magazine Operations: Report
- General Motors to Cut up to 9,500 Jobs in Europe
- EU Drops Proceedings Against Qualcomm
- Appeals Court Denies Microsoft's Alcatel Petition
- Can Murdoch Help Bing Challenge Google and Shift the Content Equation?
- HP's Mark Hurd
- HP Comes in As Expected; Is It Time to Buy?
- 9 Stocks That Play Rising Water Costs: Strategists
- Weis' Deal Likely Won't Change Big Money Contracts
- Gold Prices Can Double in 3 Years: Portfolio Manager
- Nov. 23: Unusual Volume Leaders
- Help Wanted—Please Run $4 Billion University
- Apple Comes to AT&T's Rescue
MOST SHARED
- The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
- Why Amazon Rules Retail
- Wave of Debt Payments Facing US Government
- China Eastern to Complete Shanghai Air Buy by End '09
- Paul: Audit the Fed
- The Social Media Gaming Threat
- Gold Will Collapse Like Oil Did in 2008: Charts
- Prepare For Large Decline In Stocks, Next Year?
- JAL Slides to Record Low on Bankruptcy Jitters
- Lyondell Urged to Consider Reliance Takeover Offer
Text Size 
Commercial real estate faces a crisis in the coming months that—though not as serious as the residential market collapse—will cause significant problems, investor Wilbur Ross told CNBC.
 |
Assumptions made in the earlier part of the decade about growth for the commercial market have proven untrue, leaving billions of contagion and problems across the economy, the famed vulture-fund executive said in an interview.
"The same reckless lending that characterized the subprime mortgage business in residential was also characterizing what went on in commercial real estate in the mid 2000s," Ross said.
When banks were making the commercial loans they did so under the assumption that rent rates and occupancy would increase while capitalization rates would go down, he said. None of those things have happened, he added.
"Everything's going in the wrong direction and I think we're going to see quite a lot of tragedies in that sector," Ross said.
The only bright spot is that the fallout shouldn't be quite as dramatic as the losses from the collapse of the subprime resident mortgage market.
Subprime mortgages accounted for $3.5 trillion on bank balance sheets while commercial adds up to a relatively meager $1.1 trillion.
He also predicted that the government won't take nearly as active a role in supporting the Commercial real estate side as it did with bailouts and rescue programs during the subprime storm.
"I don't think the federal government is going to do much to help the commercial building side, because individual home owners vote, but buildings don't vote," he said.
- A diet high in fat and sugar might actually be good for your portfolio.
- Warren Buffett and Bill Gates discuss the economy and other subjects with CNBC's Becky Quick.
- From the AIG&T to the Merrill Lychee, Jane Wells lists this year's fashionable holiday cocktails.
- One shopper explains why – aside from the prices – he gets up at 3am on the day after Thanksgiving to go shopping every year.
- Congressman Ron Paul explains to Squawk Box why he’s pushing legislation to audit the Federal Reserve.
- …you'll want to be prepared. Tips for getting the most out of the post-Thanksgiving shopping frenzy.
Data is a real-time snapshot *Data is delayed at least 15 minutes